EUR/GBP Dipped Ahead of ECB Rate Decision

EUR/GBP edges lower near 0.8279 as sterling strengthens on market speculation surrounding the Bank of England's interest rate decision on 19 December. Recent remarks from BoE policymaker Swati Dhingra suggested "gradual" interest rate reductions, with long-term interest rates expected to be between 2.5% and 3.5%. Market sentiment that the UK central bank will cut interest rates more gradually than other major central banks could further support the pound. In the Eurozone, investors brace for a significant interest rate cut from the European Central Bank (ECB) at Thursday's final policy meeting of 2024. Rising concerns amid political uncertainty in Germany and France, coupled with the potential impact of Trump's tariffs on the Eurozone economy, could weigh on the euro. In the upcoming sessions, broader market sentiment surrounding Thursday's European Central Bank (ECB) interest rate decision and key UK economic data, including UK monthly GDP and Industrial and Manufacturing Production data for October, will drive the EUR/GBP exchange rate.

GBP/USD Rises Ahead of US CPI Figures

GBP/USD struggles near 1.2750 as investors brace for Wednesday's US Consumer Price Index (CPI) data. While the unemployment rate rose to 4.2% in November, higher-than-expected job growth, increasing average hourly earnings, an improved US Consumer Sentiment Index, geopolitical tensions, concerns about China's economy, and Trump's impending trade tariffs continue to support the USD. On the pound front, sterling performs strongly against its major peers, backed by the market outlook that the Bank of England (BoE) will leave interest rates unchanged at 4.75% in December's monetary policy meeting. However, Friday's UK monthly Gross Domestic Product (GDP) and Industrial and Manufacturing Production data for October, coupled with tomorrow's US Consumer Price Index (CPI) data for November, will shape the market sentiment around the GBP/USD pair.

USD/CAD Firms Ahead of BoC Rate Decision

USD/CAD climbed to 1.4180 due to a stronger USD following higher US yields and robust US labour market data. Despite the anticipated rise in the unemployment rate, a stronger-than-expected non-farm payrolls report reaffirmed bets that the Federal Reserve (Fed) will slash interest rates in December, boosting the USD. In contrast, rising bets that the Bank of Canada (BoC) will introduce a larger interest rate cut on Wednesday continue to weigh on the Canadian Dollar (CAD). Also, a modest downtick in crude oil prices undermines the commodity-linked Loonie, acting as a tailwind for the USD/CAD pair. Investors will keenly observe tomorrow's US Consumer Price Index (CPI) report and the BoC policy decision to gauge the directional movement of the USD/CAD pair.

EUR/USD Sinks as ECB Rate Call Looms Ahead

EUR/USD lost momentum near 1.0530 due to cautious market sentiment ahead of Thursday's European Central Bank (ECB) monetary policy meeting. Traders expect a 25-basis-point cut in the Deposit Facility Rate, influenced by factors such as Donald Trump's victory in the US presidential election, political instability in France and Germany, and a significant slowdown in Eurozone business activity. Meanwhile, the dollar gained on speculation of an upcoming Federal Reserve interest rate cut, geopolitical tensions, and concerns over President-elect Donald Trump's proposed trade tariffs. Although upbeat employment figures tempered the dollar's gains, the stronger-than-expected US Consumer Sentiment Index, which rose to 74 in December from 71.8, highlighted signs of economic growth. As market-moving Eurozone data and US data remain absent from the calendar today, Thursday's interest rate decision, and Wednesday’s US Consumer Price Index (CPI) data for November will be key drivers for the EUR/USD exchange rate.

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